9/26/2012

Total warns against oil drilling in Arctic

Total SA says energy companies should not drill for crude in Arctic waters, marking the first time an oil major has publicly spoken out against offshore oil exploration in the region.

Christophe de Margerie, Total’s chief executive, told the Financial Times the risk of an oil spill in such an environmentally sensitive area was simply too high. “Oil on Greenland would be a disaster,” he said in an interview. “A leak would do too much damage to the image of the company”.

ExxonMobil, ENI of Italy and Norway’s Statoil have also signed deals to explore for oil in Russia’s Arctic waters, while others have secured licences to drill off Greenland.

Mr de Margerie emphasised that he was not opposed to Arctic exploration in principle. Total has a number of natural gas ventures in the region, including a stake in the vast Shtokman field in Russia’s Barents Sea. The Total chief executive said gas leaks were easier to deal with than oil spills.

His comments were welcomed by environmental groups that are opposed to Big Oil’s presence in what they see as a near-pristine wilderness.

“The rest of the oil industry should heed his warning,” said Ben Ayliffe, head of Greenpeace’s Arctic campaign. “Given the risks, companies shouldn’t be touching the Arctic with a barge pole.”

Shell declined to comment. It has said in the past that it is well prepared for spills, with round-the-clock response teams on Alaska’s North Slope and a fleet of specialised vessels that will be in place before drilling starts.

According to a 2008 study by the US Geological Survey, the Arctic contains just over a fifth of the world’s undiscovered, recoverable oil and gas resources. The melting of the polar ice cap has made the area more accessible to the majors than ever before.

The region’s challenges are formidable, however, ranging from icebergs the size of cities to storms, darkness and fierce cold. There is also no certainty of success: UK-listed explorer Cairn Energy spent $1bn exploring off Greenland and failed to find commercial volumes of oil.

Total’s Arctic projects are concentrated in Russia. As well as its stake in Shtokman, it has interests in a number of onshore developments, such as a big liquefied natural gas venture in Russia’s far north known as Yamal LNG. It also operates a Siberian oilfield called Kharyaga.

Gazprom announced in August that it was shelving Shtokman due to excessive costs. But Mr de Margerie said as far as he was concerned, it was still on. “Gazprom never told me in writing that the project is over,” he said. “Discussions are not ... as active as I would like. [But] the reserves are still there.”